Volume 3, Issue 2

A Balancing Act:
Sustaining New
Directions

But it doesnt work so well with Balanced

Scorecard systems.

About the Authors

Howard Rohm is Executive
Director of the Balanced
Scorecard Institute and
an international trainer,
Howard Rohm consultant, and facilitator.
Mr. Rohm developed the
Institutes Nine Steps to Success Balanced
Scorecard framework, and has taught the
framework to several thousand participants
in 13 countries.
Larry Halbach is Deputy
Director of the Balanced
Scorecard Institute and an
international consultant and
facilitator. He has over 20
years of experience with
Larry Halbach IBM, followed by his career
as an insurance executive and consultant
in strategic planning, Balanced Scorecard
development and implementation, and
information technology management.

Let them build it and they will use it

works much better. Them and they
refer to the people in an organization
who are responsible and accountable for
performance and results. In practical terms,
this means using cross-functional teams
to build the scorecard system rather than
giving responsibility to strategic planning,
finance, or any other single group or
department. Besides using cross-functional
teams, here are some other things you can
do to increase the chance of a successful
Balanced Scorecard implementation:
spend at least as much time developing
interactive communications, vision, and
business strategy as you do developing
performance measures; focus on aligning
strategy with operations by starting with
an organizations strategic components
(mission, vision, core values, customer

value proposition, and strategic themes)

and working down to operations, projects,
activities, and tasks; and plan for and
follow through with deploying, managing,
and sustaining the scorecard system after
it is built. Simply put, we have found that
building and implementing a scorecard
system is more about changing hearts and
minds and sustaining new directions, than
it is about selecting performance measures
and buying Balanced Scorecard software. If
you are the Balanced Scorecard champion,
think of your job to implement a Balanced
Scorecard as one of helping to create a
high-performance organization, and using
the Balanced Scorecard as a framework for
aligning the organization and human capital
pieces needed to get to high performance.
This is the second article dealing with
Building and Implementing A Balanced
Scorecard: Nine Steps to Success. In
the rst article we described a framework

Creating a High Performance

Organization
This article represents Part 2 of Howard
Rohms article A Balancing Act, published
in Volume 2, Issue 2 of Perform Magazine.
Build it and they will come works for
new cell phones, Internet services, residential
home subdivisions, sports arenas, new dog
food brands, and for many other new things.

Featured in this Issue...

A Balancing Act:
Sustaining New Directions - Page 1
by Howard Rohm and Larry Halbach

Real-Time Compliance - Page 9

by David F. Giannetto

Performance Measurement and Resource Allocation - Page 11

The Balanced Scorecard in Indonesia - Page 19

by John R. Allen

an interview with Adira Finance

Get It, Set It, Move It, Prove It - Page 13

Coachs Corner - Page 21

by Mark Graham Brown

by Suzanne Bowyer

HR Metrics - Page 17

Reading Room - Page 23

by Tim Cannon

A Balancing Act: Sustaining New Directions

for building a scorecard system using our Nine-Step process.
By building we mean creating the components of a Balanced
Scorecard using the following six steps: Assessment, Strategy,
Strategic Objectives, Strategy Mapping, Performance Measures,
and Strategic Initiatives. If you would like to receive a Readiness
Assessment Checklist to prepare you for developing a scorecard
system, contact us at: info@balancedscorecard.org.
In this article, we discuss the steps involved in implementing the
Balanced Scorecard, and include recommendations for creating a
management system and sustaining the system once it is built. We
base our recommendations on our experience helping over 2,000
people in 13 countries and 60 organizations build and implement
Performance Management scorecard systems, and on being part
of the strategic planning and Performance Measurement landscape
for 30 years.

Implementing the Balanced Scorecard

By implementing we mean turning the scorecard into a true
management system and deploying, managing, and sustaining
the newly created system. We use three steps to implement the
scorecard: Automation, Cascading, and Evaluation. The output
from each step links to the input of the next step, as shown in
Figure 1.1. The circle of chevrons helps to convey the sense that
scorecard building and implementation are a continuous journey,
not a project.
Following the completion of the building steps outlined above
(Steps One through Six), the critical few performance measures
have been developed. For a Tier 1 (enterprise-wide) scorecard, 20
to 30 strategic Tier 1 performance measures and targets (expected
results) are typical. It is probably worth repeating a lesson shared
in our previous article: avoid the temptation to treat performance
measures as an end, rather than a means. We see many attempts
at developing scorecards (and other performance frameworks, as

well) where the effort is best characterized as a rush to judgment

to get to measures. Precious strategic critical thinking is lost if this
path is pursued.
Once we have a good set of strategic performance measures,
a Performance Measurement information system is needed to
collect and report performance data and transform the data into
performance information. The distinction between data and
information is important, as raw performance data is of little use
to most people. Think of information as data with value added.
The value comes in the form of context, visualization (reporting
formats), trends, and benchmark comparisons to others results.
Step Seven involves automating the Balanced Scorecard system,
and consists of analyzing software options and user requirements
to make the most cost-effective software choice for today and
to meet enterprise performance information requirements in the
future. Software options fall into the general categories shown in
Figure 1.2, which shows relative comparisons of software solutions
based on meeting overall enterprise requirements for performance
information, and the relative cost and time to implement a software
solution. Software options range from spreadsheets and databases,
designed to meet very simple enterprise reporting requirements,
to full data warehouses, designed to link disparate information
(performance and other) together in an integrated management
system.
We treat Automation as the seventh step in the nine-step
framework, to make sure that the proper emphasis is placed on
strategic thinking and strategy development before software
seduction sets in. Building a scorecard system is a lot like
building a house, where the pieces need to come together in the
right shape, size and time, and need to be assembled by the right
craftsperson to make the house structurally and functionally
sound. Purchasing software too early limits creative strategic
thinking, and purchasing software late makes it difcult to sustain

Figure 1.1: Building and Implementing a Balanced Scorecard

A Balancing Act: Sustaining New Directions

Figure 1.2: Performance Information Software Solution Space

momentum for the new system, as performance information

reporting and utilization is clearly an early benet to be captured
from the process of building the scorecard system. Having said
this, it is also clear that software can help the critical thinking
process (and the project management process at the end of the
building steps Step Six: Strategic Initiatives) by capturing
the results of strategy development, objective commentary, and
strategy mapping as the process unfolds. Our recommendation
is to analyze your software options early in the building process,
decide if a software selection early on will add value to the process
of building the scorecard, and then timing the software purchase
to maximize the value to the Balanced Scorecard team and the
managers and other employees who will use the performance
information to better inform decision making.
The costs of deploying software information systems (including
the price of the software, plus training and support) range from
several thousand dollars to several hundred thousand dollars. A
software choice should be based on value to the organization. In
addition to the price of the software, key selection criteria include:
visualization of performance results; ease of setup; training and
maintenance; robustness of the underlying database engine;
compatibility with existing enterprise IT architecture; vendor
product and technical support; product maturity and vendor
experience; and ease of use.
Step Eight involves cascading the corporate scorecard
throughout the organization to business and support units, and
ultimately to teams and individuals. Cascading means translating
the corporate scorecard into department and division scorecards
that are aligned with corporate strategy. In other words, aligning
and translating corporate strategy throughout the organization.
We have found that the most effective way of cascading is to start
with the objectives and measures from the enterprise-wide (Tier 1)
strategy map, and develop supporting objectives (and measures)
for business and support units (Tier 2), and again for teams and

individuals (Tier 3). In a typical organization, separate scorecards

are developed for each major department and support ofce, and
these scorecards are linked to the corporate scorecard through
objectives. Since objectives are the building blocks of strategies,
the alignment of objectives aligns strategy. Performance measures
align as well, some as roll-ups to higher-tier measures, and
sometimes to composite measures where the weighted average of
a number of measures is used as a composite index.

Since objectives are the building blocks

of strategies, the alignment of objectives
aligns strategy as well.
Cascading to the objectives, tasks, and activities of Tier 3,
aligns corporate and department strategy to teams and individuals.
In some (typically large) organizations, an additional cascading
level may be used, such as for customer-facing services.
Strategies developed during the corporate scorecard building
process are the links that make the mission and vision of the
corporate organization operational to operating business and
support units, such as IT and human resources. Starting with a
corporate scorecard and cascading objectives down to business
and support units and then to teams and individuals assures that
the work performed in all organization units is relevant and linked
to organization mission and strategy. Each business and support
unit can connect the dots and trace the work that they do back up
to the overall big picture direction of the organization.
Figure 1.3 shows the concept of cascading, assuming one
starts with a corporate scorecard at Tier 1, and then develops
Tier 2 scorecards. One could continue the example to Tier 3
scorecards by developing Tier 3 objectives and connecting them
to Tier 2 objectives. As a practical matter, objectives are more
operational and less strategic as one goes farther down to lower

A Balancing Act: Sustaining New Directions

tiers. For example, teams and individuals link what they do at Tier
3 (typically tasks and activities) to what the organization must do
to be successful (objectives and strategies) at Tier 2.
Some organizations start not with a Tier 1 scorecard, but with a
Tier 2 scorecard. This could occur when a support unit scorecard is
built rst (e.g., IT). In this scenario, other scorecards are developed
horizontally (e.g., to Finance or HR) and/or vertically (e.g., to Tier
1 corporate, or to Tier 3 teams and individuals). In these situations,
it is important to keep strategic intent of the organization in mind,
to avoid sub-optimizing a departments activities at the expense
of enterprise goals.
Step Nine involves evaluating the success of chosen business
strategies. The key question is: Were the expected results
achieved? Remember that strategies developed in Step Two
of our Nine Steps to Success framework were hypotheses of
how an organization believes it creates value for customers and
stakeholders. Adjustments to strategy (and mission and vision, if
necessary) are likely as performance information is analyzed and
market competitive forces are considered. Creating an analysis
feedback loop to test strategy assumptions is an important step and
one that many organizations overlook in their strategic planning
implementation. The evaluation step includes the following
components:
Ensuring that organization learning and knowledge
building are incorporated into planning;
Making adjustments to existing service programs;
Adding new programs if they are more cost-effective;
Eliminating programs that are not delivering cost-effective
services or meeting customer needs;
Linking planning to budgeting.

The Nine Steps to Success framework is a disciplined way

to develop the pieces needed to build a strategic management
system. Now it is time to put the pieces together into a strategic
management system and start using the system to produce the
results you want.

Building the Management System and Managing

with the Balanced Scorecard
Building and implementing a scorecard system is one thing;
turning the scorecard into a useful and used management system
is something else entirely.
The key to transforming a scorecard into a management system
is to start at the right level of granularity and connect the dots
among the components of strategy (mission, vision, values, pains,
enablers, strategic results and themes, and strategic objectives)
and the components of operations (projects, processes, activities,
and tasks), and the budget formulation and cost reporting
processes. Performance measures tie the parts together, and give
us a way to measure how successful we are at achieving our goals.
Figure 1.4 shows the logic for connecting strategy to operations.
Strategy is shown as a vertical sequence of steps (equivalent to
starting with expectations at a high altitude, such as expected
organization-wide strategic results, and deriving aligned lower
altitude initiatives, projects, and tasks). Operations is shown as a
horizontal sequence of steps, with the activity or project outcomes
linked to the outputs, process steps, and inputs required to deliver
the activity or project results. The Balanced Scorecard gives us
the ability to develop the aligned components of this strategic
management system in an ordered, disciplined manner.
We are often asked How do you effectively manage an
organization once you have a Balanced Scorecard in place?
In other words, What are the key things you should do that
differ from your traditional way of managing? We attempt to
answer these questions below and give guidance on how to best

Figure 1.3: Cascading Scorecards Based on Linked Strategic Objectives

Each business unit develops objectives and performance measures relevant to their organization.
Alignment is maintained through the linkage of corporate objectives and performance measures to
lower-tier supporting strategic objectives and performance measures.

A Balancing Act: Sustaining New Directions

Figure 1.4: Linking Organization Strategy & Operations

take advantage of the strategic levers the Balanced Scorecard

provides. This is a compilation of the experiences and wisdom of
the associates of the Balanced Scorecard Institute, based on our
collective knowledge from a wide variety of organizations. The
following are management practices that we have seen lead to
success in imbedding the scorecard philosophy into an organization
and enhancing the results achieved from the scorecard system.
These practices represent the key elements of using the Balanced
Scorecard as a Strategic Management System.

Now that your scorecard is built, be careful

not to go back to business as usual. Work hard
to cut off attempts to revert to old ways.
Its time for a change avoid Business As Usual. Until you
have been managing with a scorecard for some time, people will
naturally be inclined to manage in the same ways they always have,
without regard to the scorecard and the direction it provides. Now
that your scorecard is built, be careful not to go back to business as
usual. Work hard to cut off attempts to revert to the old ways. The
scorecard provides a natural framework for reorganizing (actually
revitalizing) discussion around your strategic themes and your
scorecard perspectives (and maybe reorganizing the organization
as well!). Organize all of your executive, management, and
department meetings around the elements of strategy. In this way,
attention will be focused on the strategically-important issues
and the organization will naturally be led in those directions.
People will likely try to structure meeting agendas in the same
functional/departmental format that has been used in organizations
for decades. Use a different approach after you have built your
scorecard system, such as holding meetings around your strategies,
your initiatives, or your perspectives (or, ideally, all of them!).
Also, ensure that scorecard meetings are strategic, not operational.
Focus meeting energy on strategic visioning (How safe will our
streets be in ten years? not How many potholes did we ll last

month?) Avoid executive discussion on detailed, operational

strategies, objectives, and measures that are not on the corporate
scorecard. Push operational discussions down to the departmental
(business or support unit) level, or to teams and individuals.
Assign permanent Balanced Scorecard roles. To continue
emphasis on the scorecard and strategic management, it is
important to have a number of people assigned to scorecard roles
on a permanent basis. You should assign specic scorecard roles
and responsibilities to key people throughout the organization.
This imbeds strategic thinking in the organization and builds
commitment to ongoing strategic management. These roles include
the scorecard champion, corporate and departmental performance
measure owners, and the assignment of responsibility for
individual themes or perspectives to specic owners. Often, client
organizations will assign departmental scorecard champions who
are responsible for scorecard management and communication
in their individual areas. In addition, these champions can be
members of a scorecard advisory group that meets regularly to
discuss scorecard issues and suggestions.
One client formed permanent teams around each of their
strategic themes to provide guidance and continual direction
that will carry the scorecard efforts forward into the future. Each
of these teams is headed by a key manager, but made up of a
combination of managers and cross-functional staff members from
across the organization. This approach ensures that the strategic
themes receive attention throughout the year, and year by year
into the future.
Use the scorecard process to develop the strategic plan.
Strategic planning is more valuable if you use the development
of a Balanced Scorecard as your framework. Instead of using a
consultant or the internal strategic planning department to write a
plan, use key employees in the organization to build the plan and
the management system. We nd that the process of using cross-

A Balancing Act: Sustaining New Directions

functional teams to build the strategic plan and management
system, with expert facilitation and guidance, is critical to longterm success of the new management system. Those of you who
have experience with strategic planning the old way (i.e., giving
the assignment to a few internal planners or hiring a consultant
to do it for you), know how few times the resulting strategic plan
becomes the guiding light of the organizations resourcing, and
strategic and operations planning. In the old way, most strategic
plans are little more than thinly veiled justications for favorite
programs and projects the organization is already funding. The
Balanced Scorecard puts more strategic thinking into the strategic
plan development process. When we nish a scorecard system, the
resulting strategic plan is under ten pages, and all the important
strategic elements of the organization are laid out clearly and
concisely, and aligned. The dots do, indeed, connect.
Your planning process will become an annual evaluation and
revision of the corporate scorecard. Be sure to fully integrate the
Balanced Scorecard into your strategic planning process. Each
year you should assess your progress against the strategic goals
and determine whether or not your strategic hypotheses (the causeand-effect linkages of your strategy map) are valid. You should
also assess the strategic impact of external events and adjust the
scorecard (strategies, objectives, measures, and initiatives) to
reect your experience and the current environment. This is Step
Nine of the Nine Steps to Success framework, and is essential
to long-term strategic management success.
Use the Balanced Scorecard strategic plan to drive budgeting
and cost control. In Balanced Scorecard organizations, the scorecard
should play an active role in the organizations budgeting process.
It is usually difcult to obtain funding for new initiatives, and in
many organizations, the budgeting process is driven by funding
favorites, or day-to-day operations. The Balanced Scorecard
improves the budget process because strategic initiatives have

been identied through the scorecard building process, and it is

practical and even essential to set aside a portion of the budget
for these strategic projects. Using the Balanced Scorecard to
drive the budget results in a strategic, or performance budget.
Day-to-day activities can be separately funded, but linked, in an
operating budget. A Performance Budget is a budget formulated
by activities and programs, as opposed to organizational units.
Results-oriented business planning is combined with planned
measurable outcomes to produce a budget where policy decisions
can be informed by program performance and cost information.
Once those policy decisions are made, the same performance
measures guide the day-to-day operational management of
programs to ensure that budgeted services are delivered with the
intended results. These measures (leading and lagging) provide
information on how results are produced, what is working, how
well, and where improvements are needed to achieve the strategic
goals.

Your planning process will become an

annual evaluation and revision of the
corporate scorecard.
Some organizations have eliminated the formal annual budget
dance, and instead use a rolling quarterly budget that allows
real-time adjustments based on a quarterly strategic assessment.
In addition, many organizations use the scorecard to lead them into
Activity Based Costing, which can further ensure that the strategic
goals of the organization are accomplished cost-effectively.
Figure 1.5 shows how the elements of strategy, operations,
budgeting, and employee accountability can be combined into
an integrated strategy-driven management system. Employee
Performance can then be aligned with enterprise and department
performance to produce an integrated management system where

Figure 1.5: Balanced Scorecard Strategic Management System

A Balancing Act: Sustaining New Directions

Figure 1.6: Sustained Strategic Management System

what is accomplished is more important than what is produced or

how many hours are spent in the production of services.
Continue to work on the strategic enablers. There are a
number of the elements of scorecard building and implementing
that need to be continued in order to sustain progress made
and strategic focus. These enablers include: communications,
change management practices, incentives, reporting results, and
prioritizing initiatives.

Communications is an outcome, not an

activity, and two-way communication is the
key to a good outcome.
Early in the process of building your scorecard system,
the importance of communicating organization strategy and
desired results will become obvious. So will the importance of
communicating why you are building a new management system.
In the absence of information on why from the leaders of the
organization, employees will make up their own answer as to
why. Ensure that you maintain and implement a communications
strategy and plan even after the scorecard has been implemented.
Remember that communications is an outcome, not an activity,
and two-way communication is the key to a good outcome. The
Balanced Scorecard strategic management system is a change
initiative, designed to change behaviors, and this can only be
accomplished by interactive, two-way communications at all
levels of the organization. Regularly communicating results is
important, listening to what employees think and feel is more
important. Hearts and minds will not be won over with a news
article or a web page, so communicate often and well. Also, be sure
to highlight successes that resulted from the scorecard process.

Highlighting early success is crucial to maintaining momentum

of the new system and building sustainability. Periodically review
your communications plan, and make changes as appropriate to
reect organizational or strategic changes.
You should also continue to follow good change management
practices during and after development of the scorecard. These
practices are incorporated in the Nine Steps for Success
framework, and should be continued as you go forward to ensure
that progress is sustained. Some of the key areas to consider are:
continued communication of the vision and rationale behind the
scorecard, involvement of people from across the organization
in planning and implementing the changes, communication of
results to everyone in the organization, ongoing scorecard training
especially for new people, employing process teams to improve
throughput, and use of rewards and recognition to emphasize and
reinforce desired behaviors.
Be sure to continue to link incentive reward systems to
performance (and scorecard measures). Some organizations decide
for a variety of reasons to defer this step and some never do affect
this linkage. We strongly recommend that reward systems reect
the scorecard objectives and do so as quickly as is reasonably
possible. Of course, it is prudent to take time to ensure that the
measures are properly dened, captured, validated, and calibrated
before using them to provide signicant portions of peoples
compensation, but it is the most powerful way of getting peoples
attention and focusing on the things that matter. Once you have
begun rewarding people for performance, continue to do so and
make certain this linkage is incorporated into each years rewardand-recognition program. Rewards and other incentives can take
many forms, both monetary and non-monetary. Many studies have
shown the importance of non-monetary incentives to achieving
long-term positive impacts on behavior.

Figure 1.7: Building a High-Performance Organization

High Performance Organization = Shared Vision + Bold, Well-Executed Strategy

+ Ecient Communications and Processes + Motivated Sta
Continue to report performance results often and draw
comparisons to expected results. Look for ways to visualize
performance that employees will nd useful. There are many ways
to show data and information, and the usefulness of performance
information will be tied to how it is visualized and presented.
At different levels of an organization, different visualization
techniques should be used to drive the behaviors being
sought. People need to see regular feedback, and the frequent
communication of results enables quick corrective actions to be
taken when problems begin to develop. If people can easily and
regularly see whether or not they are on track to reach corporate
goals, and if their rewards are dependent on achieving those goals,
they will naturally apply the effort required to stay on track. Use
the scorecard system to improve organizational performance,
not punish lack of individual performance, and to track progress
across reporting periods.
Regularly use the Balanced Scorecard to help select and
prioritize initiatives. The scorecard process enables management
to direct resources to those initiatives that have the greatest
strategic value. We almost always nd that an organizations
overcommitted resources are assigned to a number of initiatives
that do not have large strategic value. By consciously focusing
resources on truly strategic initiatives and canceling projects,
transferring resources, or deferring those initiatives that arent
strategic, organizations are much better able to implement changes
needed to accomplish strategic goals. This prioritization should be
part of the regular management practices and should be reviewed
periodically to ensure that resources are being deployed only on
the truly strategic initiatives.
Figure 1.6 shows the components of a sustained strategic
management system. By continuing the essential elements of
the Balanced Scorecard process, you will be able to sustain and
continue to achieve progress in strategic management.

When you have completed the steps and taken the actions
described in these two articles, you will be on your way to having
developed a high-performance organization. Figure 1.7 shows the
construction of a high-performance organization using the example
of a house we mentioned earlier. The roof and attic represent the
strategic elements of your organization, the load-bearing walls
are your strategic focus areas (strategic themes), and the oors are
performance dimensions (perspectives) that allow you to translate
your organizations vision and strategy into operational terms
(through strategic objectives). Your performance house needs to
be built on a strong foundation of engaged leadership and two-way
communications.
We hope that these ideas will help you in your efforts to
achieve maximum long-term benet from your investment in a
Balanced Scorecard. If you would like a checklist of additional
tips and tricks, send us an email to receive a free copy. If you have
questions or wish to discuss any of these recommendations, please
contact either Howard Rohm (at hhr@balancedscorecard.org) or
Larry Halbach (at lah@balancedscorecard.org) at the Balanced
Scorecard Institute.*
The Balanced Scorecard Institute provides training and
consulting services to private, public, and not-for-profit
organizations worldwide. Their expertise is in Balanced Scorecard
Systems, Strategic Planning, Performance Management and
Measurement, and Performance Measurement Information
Systems.
* Several Balanced Scorecard Institute associates contributed
to this article, including: Dr. Gerald Turner, Pam Weppler, Kitty
McCoy, Kevin Zemetis, Dr. Kathy Fiedler, Dr. Gardner Shaw, Jeff
Parks, and Paul Arveson. Marv Weidner of Weidner Consulting
contributed ideas on performance-based budgeting.